The Bank of Namibia has said its GDP growth projections, which extend to 2026, do not anticipate the production of oil mines or the commencement of oil production within this period, and as such, Shell’s US$400 million write-down of an offshore oil discovery in Namibia does not impact these projections.
These sentiments were expressed by Kazembire Zemburuka, Director of Strategic Communications and International Relations.
Zemburuka was responding to questions by Observer Money on the recent announcement by Shell to write down $400m related to an oil discovery made in Petroleum Exploration License (PEL) 39.
Observer Money (OM): How does the recent announcement by Shell that it will write down around US$400 million over an oil discovery offshore Namibia that it deemed commercially unviable affect BoN’s future GDP growth projections?
Kazembire Zemburuka (KZ): The Bank of Namibia’s GDP growth projections, which extend to 2026, do not anticipate the production of oil mines or the commencement of oil production within this period, and as such, Shell’s US$400 million write-down of an offshore oil discovery in Namibia does not impact these projections. As per the Ministry of Mines and Energy media release dated 10 January, the write-down was in accordance with the company’s accounting principles and as such does not reflect a reduction in exploration activity, which continues to contribute to GDP through ongoing surveys, drilling and associated services. Moreover, the bank’s projections are based on data submitted by the sector that already accounts for exploration budgets and timelines, which do not foresee production beginning within the forecast period.
OM: Has BoN ever factored in or projected the future impact of oil, gas and green hydrogen on the Namibian economy?
KZ: We remain extremely cautious in our forecast until tangible milestones such as Final Investment Decision (FID) are attained. As such, the specific baseline assumptions underlying our current projections exclude the potential impact of the emerging sectors, whilst we maintain rigorous monitoring of current activity in the mining sector with the view to assess future economic potential within the sector.
OM: What is the projected or expected impact of these industries on the Sovereign Wealth Fund?
KZ: While there is a firm intention to channel revenues from the industry towards the Sovereign Wealth Fund, the SWF Namibia Bill is still in draft format and yet to be tabled. As such, published projections on the impact on the Fund would be premature at this stage.
OM: The Shell announcement has come as a bombshell to many in the country, any assurances from the central bank that future growth prospects will not be heavily impacted?
KZ: With the overall collective exploration discoveries so far pointing to significant amounts of hydrocarbon resources, the bank continues to actively work on the sound measurement of GDP growth projections and other related macroeconomic variables in line with its mandate, which is essential groundwork that needs to be engaged to effectively and accurately account for the impact of the expected discoveries on the economy if they are realised.
